WASHINGTON 
Warning consumers that industry has failed to protect their privacy online, a top Senate Democrat said Wednesday that he will press legislation this year that would create a universal "Do Not Track" option for consumers and penalize companies that fail to honor it.

"The American people are smart," said Sen. Jay Rockefeller, D-W.Va., chairman of the Senate Commerce Committee. "They are going to figure this out. And as they figure this out, they better like what they see if the Internet is going to prosper."

Rockefeller's proposal could face an uphill battle in a divided Senate already consumed with immigration and the budget. But his comments put renewed pressure on an industry struggling desperately to escape regulation.

The online privacy debate has mostly stumped Congress and prompted a tempered reaction from the Obama administration, mindful of consumers' concerns but reluctant to crush a growing industry in a difficult economy. Last year, the White House unveiled a "Consumer Privacy Bill of Rights" calling on industry to give consumers more control over their personal information and suggesting Congress pass legislation to enforce it.

But while everyone agrees that people should be given a choice to opt out of data collection and online tracking, advertising businesses and privacy groups remain at odds over how to implement it. Much of the debate focuses on whether consumers should have to click an opt-out button, or if their browser should automatically do it for them.

Rockefeller said Wednesday that voluntary efforts by industry have fallen short because some online advertisers ignore consumer requests not to be tracked. His bill would subject businesses to penalties by the Federal Trade Commission if they do.

"I do not believe that companies with business models based on the collection and monetization of personal information will voluntarily stop those practices if it negatively impacts their profit margins," Rockefeller said.

Industry is pushing back. The Digital Advertising Alliance points to its Web-based icon program that links consumers to an opt-out site of participating advertisers. They say some 20 million people have visited their site and only 1 million of those consumers chose to opt out of all ad tracking. Testifying at the hearing, Mastria said he thinks the industry has "delivered basically in principle" what Rockefeller proposes through legislation.

"Consumers are very pragmatic people," Lou Mastria, managing director of the Digital Advertising Alliance, said in an interview this week. "They want free content. They understand there's a value exchange. And they're OK with it."

The Do Not Track proposal is part of a broader debate about online privacy that includes what sensitive data might be collected from a person's mobile device. Because a smartphone can divulge a person's location, the FTC warned in a recent report that detailed profiles of a person's movements can be collected over time and in surprising ways, revealing a person's habits and patterns and making them vulnerable to stalking or identity theft.

Some researchers also say they suspect retailers are engaging in "price discrimination" - the practice of setting a price based on personal data, such as the average home price in their area or a person's proximity to a competitor.